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Chicago Fed Letter, No. 182, October 2002
Solving the Problem of Small Change

In the last hundred years, monetary systems have evolved from commodity based, meaning their value is tied to a commodity like gold, to fiat based, meaning their value is not tied to anything. Why did this happen? What was wrong with the old commodity-based systems? A recent book explores these historical developments and shows how the problem of small change played a crucial role in the introduction of fiat money.

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